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Natural Resources, Democracy and Corruption

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  • Sambit Bhattacharyya
  • Roland Hodler

Abstract

We study how natural resources can feed corruption and how this effect depends on the quality of the democratic institutions. Our game-theoretic model predicts that resource rents lead to an increase in corruption if the quality of the democratic institutions is relatively poor, but not otherwise. We use panel data covering the period 1980-2004 and 124 countries to test this theoretical prediction. Our estimates confirm that the relationship between resource rents and corruption depends on the quality of the democratic institutions. Our main results hold when we control for the effects of income, time varying common shocks, regional fixed effects and various additional covariates. They are also robust across different samples, and to the use of various alternative measures of natural resources, democracy and corruption.
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Suggested Citation

  • Sambit Bhattacharyya & Roland Hodler, 2009. "Natural Resources, Democracy and Corruption," OxCarre Working Papers 020, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  • Handle: RePEc:oxf:oxcrwp:020
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    More about this item

    Keywords

    Natural resources; democracy; political institutions; corruption;
    All these keywords.

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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